On the economic front for 2002, investment managers expect:
- real GDP in Canada to grow by 1.9% over the year,
- the inflation rate to remain between 1% and 3%, and
- the Canadian dollar to strengthen, closing at 65 cents to the US dollar at the end of the year.
Positive forecasts were also given for the equity
markets in 2002. Investment
managers surveyed predict double-digit equity market returns for the year.
A majority expects lower returns from the bond markets and all respondents foresee increasing their allocation to equities at the expense of bonds in their portfolios by mid-2002, according to Towers Perrin.
Survey respondents also expect higher yields in fixed income by the close of 2002, with the biggest rate increases expected at the short-end of the yield curve. Investors also expect higher yields on five- and 30-year bonds. These trends should result in lower bond returns for the year.
Towers Perrin surveyed 108 investment management firms
in the fourth quarter of 2001 with respect to their market
and economic expectations for 2002, and received a 66%
response rate. The survey includes forecasts from 48
Canadian and 23 foreign investment firms.